Using internal mic: sound input level greyed-out

Hi all!

I can't find a way to get Input sound working on my iMac. I can't here myself in any Photo Booth film clips I make, and I can't be heard in Skype. Output works fine, I can hear music etc.

When I go to System prefs I see that the Input Level indicator is "greyed-out" - it simply doesn't respond at all...

screen cap bellow illustrates the problem.

I notice that when I connect earphones, the Input Level flickers to life, then "dies" again... not quite sure what this indicates - a hardware problem?

Very happy for any tips that may solve this problem!

Thanks in advance :-)